How to use the go/no-go purchasing technique

The go/no-go decision relates to deciding to proceed or not to proceed with a recommended course of action and provides a gateway to the allocation of resources.   

How is the go/no-go decision used in purchasing decision? Read on to find out. ​

What is the go/no-go technique?
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The go/no-go technique is a decision making process where the authoriser reviews a recommendation and will either authorise a go (e.g. to start) or authorise a no/go (e.g. stop or further information required) decision based on the information they are presented with. 

How does the go/no-go decision work in theory? 
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The expression "low hanging fruit" describes something that is considered easy or easier to achieve than other options.

​Using this analogy, you could pick the low hanging fruit without the use of a ladder. But you notice that the best fruit is hanging at the top of the tree. 

You weigh up the pros of picking more fruit with the cons: the cost of sourcing a ladder and the risk of harm to yourself, and the fruit if you fell off the ladder. 

You would try to determine the probability of falling off the ladder, and the time it would take to source the ladder. 

You also consider the quality of the ladder, your ability to climb the ladder, the ground underneath your feet and the weather conditions. 

​You may conclude that if you could find somebody to hold the ladder (whilst you picked the fruit) this would lower the risk. But this could also eat into your profits as the person may expect compensation for their time holding the ladder.  

You consider: 

How much will I make from selling the fruit?
How much will the ladder cost? 
How much will a person's time cost? 

​If sourcing the ladder and help costs more than the fruit is worth it would be wise to make a no/go decision.

If on the other hand you could borrow a ladder from a kind person who would also hold the ladder for you for free, you could obtain all the fruit and keep all the proceeds. It would therefore be wise to make a go decision. 

How does the go/no-go decision work in practice? 
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It is January and your manager has asked you to review what the organisation is spending money on with the goal of making savings before the end of December.   

Your job performance is measured and assessed on your ability to achieve a defined level of savings for the organisation within a 12 month period and to achieve a minimum customer satisfaction rating. 

​​In the above scenario, there is a requirement to hit a target within a defined time period whilst ensuring your customer is happy with the outcome. 

This may lead you to ask some or all of the following questions when making your go/no-go decisions:
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• What in year savings opportunities are there?
• Are there any costs associated with making the change?
• How easy/difficult will the change be?
• Will pursuing this activity put pressure on my existing workload? 

We will now look at each of the above questions in turn. 

What in year savings opportunities are there?
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By performing the necessary analysis you can determine the level of savings available for each identified opportunity.

Are there any costs associated with making the change?​
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If your saving opportunity includes switching suppliers it is important to check the contract for any early termination charges. 

How easy/difficult will the change be? 
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Are there any other costs associated with making a change that you need to factor into your decision making process. 

Will pursuing this activity put pressure on my existing workload? 
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Whilst analysing each saving opportunity it is prudent to also determine the amount of your time and your effort required to realise the savings.

Is there an easier way to realise the same level of savings? 

In Summary
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The go/no-go decision making process is a technique, rather than an exact science. There will always be an element of risk, even if you decide to do nothing. 

The go/no-go decision making process is a useful technique for the purchasing professional. When used correctly it can save you time and effort by not pursuing projects that have a higher probability of failure. 

About the author 
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Naomi Clews is a CIPS qualified purchasing and supply chain management consultant with over 25 years hands on experience. Read more of Naomi's purchasing related blog posts here.